28th August 2026
For generations, the university has been regarded as one of the safest institutions in Britain.
Universities may have argued about funding, complained about governments and fought over student numbers, but there was always an assumption that they would still be there. They were seen as permanent features of our towns and cities, supported by government, tuition fees, research income, endowments and an apparently endless supply of young people wanting degrees.
That assumption is beginning to look rather less secure.
Across Britain, universities are under increasing financial pressure. Staff are being made redundant, courses are being reviewed, departments are being reorganised and investment is being postponed. The problem is not confined to one or two badly managed institutions. Regulators are warning that the financial difficulties facing higher education are becoming structural.
In England, the Office for Students has already warned that universities and colleges are facing increasing financial challenges, with more institutions forecasting deficits and declining operating cash flow. Its latest financial work continues to warn universities against being overly optimistic about future student recruitment.
That should make us sit up and take notice.
The important point is that a university does not suddenly become financially vulnerable simply because it makes a loss in one year. Like any large organisation, it can have reserves, assets and access to finance. A university can therefore continue operating for quite some time while its underlying business model is deteriorating.
The danger comes when the annual income is no longer sufficient to cover the cost of running the institution.
And that is where Britain's universities increasingly find themselves.
The university funding model has changed
For years, universities benefited from rising student numbers. More students meant more tuition income, more accommodation demand and more economic activity around campuses.
But there was another increasingly important part of the equation: international students.
Universities could charge overseas students substantially more than domestic students, creating an income stream that helped compensate for the relatively constrained income available from UK undergraduate students.
That model worked particularly well while international recruitment was growing.
It becomes much more problematic when international recruitment starts falling.
The Office for Students has identified changes in international student recruitment as one of the factors contributing to the worsening financial position of English higher education. Its analysis has even warned that, without changes in response to student recruitment patterns, a very large proportion of providers could potentially move into deficit.
This is why the current crisis is rather different from the familiar argument about universities simply needing more money.
The sector has become dependent upon a particular pattern of student recruitment to make the numbers work.
If that pattern changes, the financial consequences can be surprisingly rapid.
The uncomfortable arithmetic
There is another problem.
University costs don't fall as quickly as student numbers.
A university cannot simply close a classroom and save all the associated costs. It still has buildings to heat, maintain and insure. It still has laboratories, libraries, IT systems, student support services and administrative departments.
It still has staff.
And it still has pensions and other long-term commitments.
This creates what accountants would recognise as a high fixed-cost business.
If student numbers fall by 10 per cent, costs don't necessarily fall by 10 per cent.
That is why universities are increasingly looking at redundancies and restructuring. It is not necessarily because they suddenly became badly managed. Some are attempting to reduce their cost base because the income which previously supported it is no longer guaranteed.
There is an important lesson here for anyone who has watched the problems faced by councils, colleges or other public bodies.
An organisation can look enormous and secure while its financial foundations are quietly weakening.
Eventually something has to give.
Scotland has an additional problem
The situation in Scotland is particularly interesting because Scotland has chosen a different approach to undergraduate tuition fees.
Scottish students studying for their first degree generally do not pay tuition fees in the way students in England do. That is an important social policy decision and one which has strong public support.
But free tuition does not mean free education.
Somebody still has to pay the university for teaching the student.
If government funding does not rise sufficiently to cover the real cost of providing that education, the university has to find the difference somewhere else.
That helps explain why international students have become particularly important to Scottish universities.
It also explains why a change in international recruitment can have consequences well beyond the university itself.
This is not simply about vice-chancellors and university finance departments.
Universities employ thousands of people. They rent and maintain buildings. They buy goods and services. Students rent accommodation, buy food, travel, socialise and spend money in local shops.
In many towns and cities, the university is effectively a major economic engine.
If that engine starts slowing down, the consequences spread far beyond the campus gates.
What does this mean for the Highlands?
This is where the story becomes particularly relevant to us in the Highlands.
The University of the Highlands and Islands is not a conventional university.
Its dispersed structure means that its economic importance is spread across a huge geographical area. Campuses and learning centres form part of the economic and educational infrastructure of communities which could never support a conventional large city university.
That makes financial pressures particularly important.
Recent UHI-related board papers show that individual parts of the wider organisation have been working on plans to move from forecast deficits towards financial sustainability or break-even.
That does not mean UHI is about to disappear.
But it does demonstrate the problem.
A dispersed university has some advantages, but it also has costs. Maintaining facilities across a huge geographical area is not necessarily cheaper simply because individual campuses are smaller.
In fact, there is a danger that financial pressure could eventually encourage precisely the sort of rationalisation that rural communities have experienced elsewhere.
A service which is financially difficult to maintain in Thurso, Wick, Kirkwall or another remote location can look very different when viewed from a spreadsheet in a central office.
That is why university finances matter to Caithness.
UHI is not simply an educational institution. It is part of the region's economic infrastructure.
It provides jobs. It attracts students. It supports businesses. It provides training for local employers. It gives young people an opportunity to study without leaving the Highlands.
And, perhaps most importantly, it provides a mechanism through which knowledge and higher education can remain in communities which would otherwise lose many of their young people.
Could universities actually fail?
This is the question which is beginning to move from theoretical discussion into serious financial planning.
The answer is that some could.
That does not necessarily mean we will see universities closing their doors one morning and disappearing.
There are many stages between financial difficulty and outright closure.
An institution can start by freezing recruitment.
Then it can reduce staff numbers.
It can close courses which are expensive to deliver.
It can merge departments.
It can reduce capital investment.
It can sell property.
It can borrow.
It can seek partnerships or mergers.
Eventually, if none of those measures work, government and regulators may have to become involved.
The Office for Students has explicitly recognised the possibility of unplanned institutional closure and has systems designed to protect students if a provider gets into serious financial difficulty.
That fact alone is revealing.
Governments do not normally spend time planning what happens if an institution which is supposedly financially secure suddenly fails unless there is a reason to consider the possibility.
The bigger question is whether the business model has broken
Perhaps the most important question is not whether universities are temporarily short of money.
It is whether the financial model which developed over the last two decades is still sustainable.
Universities have increasingly had to operate like businesses while still being treated politically as public institutions.
They compete for students.
They compete internationally.
They build accommodation.
They invest in campuses.
They employ thousands of people.
They market themselves around the world.
But at the same time they are expected to provide access to higher education, support disadvantaged students, undertake research and maintain courses which may be socially valuable but financially unattractive.
Those objectives do not always fit neatly together.
A university might be able to make money from a popular business course with hundreds of students.
It might lose money teaching a specialist engineering, agricultural, marine or rural course to a relatively small number of students.
Yet Britain may desperately need graduates in the second category.
That is the dilemma.
If universities are forced to behave purely as businesses, some socially important education may disappear.
If governments insist that universities provide everything society wants while refusing to provide sufficient funding, deficits will grow.
Neither is sustainable indefinitely.
Britain may eventually have to make a difficult choice
There is an uncomfortable possibility that the current crisis will eventually force a much larger debate about what universities are actually for.
Are they primarily businesses selling degrees?
Are they public services?
Are they economic development organisations?
Are they research institutions?
Or are they supposed to be all of these things simultaneously?
Britain has spent years avoiding that question because the system expanded sufficiently to make the contradictions less obvious.
Now the money is getting tighter.
That changes everything.
If international students continue to become more difficult to recruit, if domestic student numbers stop growing and if the cost of employing staff and maintaining buildings continues to rise, universities cannot simply carry on as before.
Something has to change.
And that something may eventually include the structure of higher education itself.
The warning for rural Scotland
For somewhere like Caithness, the danger is not that the University of the Highlands and Islands suddenly vanishes.
The more realistic danger is gradual. A course disappears because there aren't enough students. A post isn't replaced. A facility is considered too expensive to maintain. A service is moved elsewhere.
A decision is made that a particular activity can be delivered more efficiently from a larger centre.
None of those decisions on its own looks catastrophic.
But over ten years they can fundamentally change what a university means to a community.
We have seen this pattern with other public services.
Centralisation rarely arrives as one dramatic announcement saying: "We are removing this service from your town."
It usually arrives as a series of individually defensible financial decisions.
That is why university finances deserve attention now, while there is still time to influence the direction of travel.
The next financial crisis may not look like a crisis
Perhaps the most worrying thing about all this is that there may be no single day when Britain suddenly discovers that its universities are in trouble.
There will be no equivalent of a bank run.
Instead, the crisis could arrive quietly. One university announces 200 redundancies. Another closes several courses. Another sells property.
Another stops replacing staff. Another reports a deficit. Another begins discussions about collaboration.
And eventually people look back and realise that the university system they knew has been transformed.
That is how financial crises often work.
The danger isn't necessarily the dramatic collapse.
It is the slow erosion of an institution until the choices available to government, universities and communities become much narrower.
Britain therefore needs to start asking a question which would have sounded rather strange only a few years ago:
Can the country afford its universities in their present form?
And if the answer is no, what exactly are we prepared to change?
For the Highlands, there is an additional question.
Can we afford to allow financial pressures to weaken one of the few institutions specifically designed to bring higher education, skills, research and economic opportunity into remote communities?
That is a debate worth having now before the accountants, rather than the communities, end up making the decisions.